RBI Hikes Repo Rate. Will EMIs also Increase?

RBI repo rate hike, loan interest rates and EMI hike

First time in Modi’s regime, RBI had back-to-back increased the Repo rate by 25 basis points which is gone to 6.50 from 6.25. Since 2014, till the recent Budget 2018, RBI either reduced the repo rate or maintained status quo. Let us know more details from Loanyantra about how the Repo rate, home loan, personal loan interest rates are interlinked.

What is Repo Rate?

Repo rate is the rate at which the RBI lends money to the banks. As we pay interest to the bank s when we take loan, the same way the banks pay interest to the RBI when the banks take loan. So, that interest rate at which the banks pay to the RBI is called Repo rate.

Impact of Repo rate hike on banks and banks rates – Understanding through Loanyantra.com

So, the repo rate increase means, the banks need to pay more interest to the RBI. So, for the banks it is time to increase the revenue. The source of revenue to banks is Public. So, banks calculate their earnings, profits and then increase their source of income from lending (home loan, personal loan, etc) by increasing the lending rates.

Repo rate hike and the Banks Home loan, auto and other personal loan interest rate hike – 

The leading banks like State Bank of India (SBI), Punjab National Bank (PNB), HDFC and ICICI Bank increased their benchmark lending rates or MCLR by up to 10 basis points, making loans a little costlier for consumers in the last quarter one week before the RBI rate hike.

Every time there is a repo rate cut, SBI is the first bank to pass on the benefits to the customers by reducing the lending rates. Which is followed by other major banks like ICICI and HDFC.

That was the first time we have seen these major banks increasing the lending rates before the increase in the RBI repo rate. Hence, it is anticipated that within near period, there will not be any increase in the lending rates by the major banks like SBI, ICICI, HDFC, AXIS Bank. And truly there were no increase in the home loan interest rate.

RBI repo rate hike, loan interest rates and EMI hike
RBI Repo rate Vs Loan Interest Rates Vs EMI hike

While there is a back-to-back hike of repo rate by RBI for two times this year, 2018, it is natural for the borrowers to estimate a hike in the lending interest rates. However, the lending leaders are yet to react. This is the question of total system liquidity as RBI also hiked reverse repo rate to 25 basis points. If liquidity is tight, banks may react on the hike by increasing the lending interest rates. We may have to wait for the news from the banks before even we calculate our EMIs.

The home loan interest rates were never below 9% before 2014. In the near recent times, the home loan interest rates have reached to the maximum of 8.7%.

So, it is still advantageous, for all those who want to buy home, go for home loans and get the best one that suits you better via loanyantra.com. as, though the repo rate has increased, the lending rates remain the same, atleast for a while.

Hurry and fix your loan, home, auto or any other personal loan at the best interest rates ever. Do your research with Loanyantra.com., know the interest rate trends, and the market trend. Get the best fit loan from your favourite lender. All you need to do is just give a missed call to 040-71011991. Our relationship manager calls you and you can discuss in detail and get the best product with low interest rate.


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